My thought process of when to buy and sell a stock
When to buy and when to sell is always the biggest question to answer.
We tend to get fearful as stocks go down and sell at the bottom. We tend to get fearful of missing out as stocks go up and buy at the top.
So what should we do?
(Before you start, you should always know your risk profile and investment time horizon.)
Here is the process that I follow.
First, I look at the macro level to identify trends.
Some points to consider:
1. What is a growing trend?
2. What is changing ?
3. What is not changing?
4. Who and what is a disruptor?
Once you identify the trends, you can zoom into the specifc companies.
I use a checklist to evaluate the companies before I invest and develop your thesis. A thesis is very important because it will gives you conviction when the market is down.
Checklist include:
- financials
- management of company
- moat
- Potential,optionality, network effect
$Amazon (AMZN.US)$ is one of the great example of how it expand its optionality. It grew from a bookshop to a leading ecommerce to the leading cloud services company. Its early investors are greatly rewarded.
Lastly, I also use dollar cost averaging when I buy a stock.
Selling is as hard as buying. So the stock that you bought have doubled. Do you sell?
I think it depends on what type of investor you are. If you are a short term trader, cashing out for profit is fine. As a long term investor, if your thesis remain unchange and the business is continuing to grow, I will continue to hold.
I will sell if:
- Original thesis changed.
- Business on continue decline, for more than 2 qtrs. $StarHub (CC3.SG)$ was showing weakness for a while before its share price slowly declined.
- Red flag spotted. For example, $Hyflux (600.SG)$ was showing warning signs when they borrowed a lot and borrowed to pay dividends.
There are so many great companies out there. $Apple (AAPL.US)$ , $Microsoft (MSFT.US)$ , $Amazon (AMZN.US)$ just to name a few.
By having your own system, it will make your investment process better and hopefully more successful.
We tend to get fearful as stocks go down and sell at the bottom. We tend to get fearful of missing out as stocks go up and buy at the top.
So what should we do?
(Before you start, you should always know your risk profile and investment time horizon.)
Here is the process that I follow.
First, I look at the macro level to identify trends.
Some points to consider:
1. What is a growing trend?
2. What is changing ?
3. What is not changing?
4. Who and what is a disruptor?
Once you identify the trends, you can zoom into the specifc companies.
I use a checklist to evaluate the companies before I invest and develop your thesis. A thesis is very important because it will gives you conviction when the market is down.
Checklist include:
- financials
- management of company
- moat
- Potential,optionality, network effect
$Amazon (AMZN.US)$ is one of the great example of how it expand its optionality. It grew from a bookshop to a leading ecommerce to the leading cloud services company. Its early investors are greatly rewarded.
Lastly, I also use dollar cost averaging when I buy a stock.
Selling is as hard as buying. So the stock that you bought have doubled. Do you sell?
I think it depends on what type of investor you are. If you are a short term trader, cashing out for profit is fine. As a long term investor, if your thesis remain unchange and the business is continuing to grow, I will continue to hold.
I will sell if:
- Original thesis changed.
- Business on continue decline, for more than 2 qtrs. $StarHub (CC3.SG)$ was showing weakness for a while before its share price slowly declined.
- Red flag spotted. For example, $Hyflux (600.SG)$ was showing warning signs when they borrowed a lot and borrowed to pay dividends.
There are so many great companies out there. $Apple (AAPL.US)$ , $Microsoft (MSFT.US)$ , $Amazon (AMZN.US)$ just to name a few.
By having your own system, it will make your investment process better and hopefully more successful.
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HopeAlways : I like your pointers and checklist. Very helpful!![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
AstroGal : Like how you explained this, easy to understand and very helpful too!
FuFu 888 : Catch scare die, put scare fly. Don't involve
Panda2102 OP : Thanks@HopeAlways. I learned from you. keep on sharing your experience cheers
Panda2102 OP AstroGal : Glad that you find it useful.
Panda2102 OP FuFu 888 : Have a long term mindset to minimize the fear
HopeAlways Panda2102 OP :
Panda2102 OP FuFu 888 : Oops I Think I wrongly deleted your msg. If you are unsure what to do, moomoo tutorial will be a good start.
ph2046 : Great sharing